Trend-cycle decompositions and measures of persistence: does time aggregation matter?
AbstractThis paper shows that temporal aggregation affects estimates of trend-cycle variances and of persistence of shocks to economic variables. The authors analyze UCARIMA models with orthogonal components and show two results. First, they prove that when the decay rates of the autocovariance functions of the trend and the cycle are almost equal, temporal aggregation causes an increase in the trend-cycle variance ratio. Second, the authors show that temporal aggregation may increase or decrease the size of the persistence measure depending on the dynamic shape of the two components in the basic process. Copyright 1991 by Royal Economic Society.
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Bibliographic InfoPaper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/10163.
Date of creation: Mar 1991
Date of revision:
Publication status: Published in: The Economic Journal (1991)
Other versions of this item:
- Lippi, Marco & Reichlin, Lucrezia, 1991. "Trend-Cycle Decompositions and Measures of Persistence: Does Time Aggregation Matter?," Economic Journal, Royal Economic Society, vol. 101(405), pages 314-23, March.
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- David Aadland, 2002.
"Detrending Time-Aggregated Data,"
- Pierse, R. G. & Snell, A. J., 1995. "Temporal aggregation and the power of tests for a unit root," Journal of Econometrics, Elsevier, vol. 65(2), pages 333-345, February.
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